Subsidised Micro Financing and Financial Sustainability of SHGS

The Indian Journal of Commerce, Vol. 61, No. 4, October-December 2008

14 Pages Posted: 27 Jun 2010

See all articles by A. P. Pati

A. P. Pati

North Eastern Hill University

Date Written: October 2008

Abstract

Apart from emphasising on outreach it is also important for micro finance intervention to remain sustainable in the long run. Financial sustainability is the core of any financial institutions and considering Self help groups (SHGs) as grassroots level organisations engaged in the business of micro credit provision, their sustainability holds crucial for rural upliftment and is examined in this paper with the help of secondary and primary level data from Meghalaya in the northeast region of India. As observed from the secondary sources, the grading of groups and recovery status of SHG financing in Meghalaya is precarious. Many have formed groups because of subsidy provision in the SGSY scheme, and this has made the scheme very popular in the state. The primary survey on 200 SHGs though reveals a sustainable financial operation of sample groups over a three years study period, sustainability become less attractive when the subsidy is negotiated into the financial details. The self sufficiency ratios i.e. OSSR and FSSR are the primary indicators of sustainability and both of them get reduced substantially when the subsidy is introduced into the computations. This suggests a negative impact of subsidy on the financial sustainability of SHG operations, which should be curbed by encouraging group formations with non-subsidised finance.

Suggested Citation

Pati, Ambika Prasad, Subsidised Micro Financing and Financial Sustainability of SHGS (October 2008). The Indian Journal of Commerce, Vol. 61, No. 4, October-December 2008, Available at SSRN: https://ssrn.com/abstract=1630271

Ambika Prasad Pati (Contact Author)

North Eastern Hill University ( email )

Umshing-Mawkynroh
Shillong
Meghalaya, 793022
India

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
361
Abstract Views
1,142
Rank
150,929
PlumX Metrics